Posted on 09/10/2004 2:36:36 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
OK, let´s suspend the bashing of President Bush and his Democratic presidential opponent John Kerry for their stupefyingly awful records and platforms on trade policy. Let´s turn instead to how their utter inability to understand America´s globalization challenges will sandbag other major policies they´re pitching. To date, there´s no better example than Bush´s goal of turning America into an “opportunity society.”
Anyone who likes free markets and capitalism, will rightly love the concept of an ownership society; and it´s no wonder that the Republicans are making it a centerpiece of their economic platform (even if most details remain to be filled in).
Ownership´s essence is that the individual knows how to handle resources better and more responsibly than the government. So the crises America faces in, say, health care costs and retirement security are best dealt with by giving Americans “more control over their lives,” in Bush´s words.
If the taxes currently financing government´s gigantic role in these areas are cut, then individual Americans can take the proceeds and purchase their own medical care, and make the investments they find most promising to pay for their golden years. Further, not only are individuals more likely to make the choices best for their circumstances, but they also will have overwhelming incentives to use their windfalls as efficiently as possible. Along with the elimination of costly government bureaucracies, these efficiencies will produce savings for the entire economy.
Ownership society advocates also seek, in the President´s words, to enable more Americans to use tax relief to “own their own home or their own small business,” as well as to choose their own job training program to keep them competitive in the global marketplace.
These ideas are so innovative and optimistic that only gloom and doom liberals and other economic girlie-men would object, right? Not by a long shot – at least if you pay any attention to the economy and its major features and trends.
Each of Bush´s proposals faces compelling objections on its own terms. For example, are individual investors really supposed to keep up with the nanosecond-by-nanosecond changes in the financial markets? Even most finance professionals fail at this task. Is health care really just like any other good or service, and will consumers really shop for it just like they shop for sneakers or SUVs?
But the biggest obstacle to the ownership society is the steady stripping from Americans of the resources needed to buy control over their lives. And one of the biggest forces behind this worsening incapacity is a trade policy designed to plunge Americans into competition with much lower-paid third world workers, and drive down domestic wages and salaries in the process.
The facts are beyond dispute – except among Washington´s bought and paid for globalization cheerleaders. Adjusted for inflation, total U.S. private sector wages peaked at $8.62 per hour (measured in 1982 dollars), in April, 1978 – scant years after the great opening of the U.S. economy to imports began in earnest. Real manufacturing wages peaked at roughly the same time, at $8.97 per hour. (We won´t bother with public sector wages because they´re not directly set by the market.)
Since these peaks, real private sector wages have fallen 4.4 percent – a performance previously unheard of in American history. And manufacturing wages, which are most affected by international competition, have fallen 5.6 percent. Worse, even though the economy has technically been recovering from the last recession for nearly three years, real private sector wages during this period are up only 0.4 percent, and real manufacturing wages are up only 1.4 percent.
More disturbing, signs keep appearing that the link between work and economic viability is growing weaker in America. Last month´s announcement that the official national poverty rate had risen in 2003 for the third straight year, to 12.5 percent, attracted deserved attention. At least as important, however, is the large and growing number of impoverished Americans who are working Americans. One in every four working Americans today earns less than $8.70 per hour (in 2004 dollars) – the effective federal poverty-level wage. As social policy analyst Beth Shulman wrote on Labor Day in the Washington Post, this trend “undermines our most fundamental [national] ideal: that if you work hard, you can support yourself and your family.”
Far from encouraging greater responsibility-taking, these trends inevitably are creating greater government dependencies. One indication: The share of Americans enrolled in government health-care programs such as Medicare and Medicaid stands at a two-decade high of 26 percent. And as made clear by rising federal budget deficits, the national appetite for public services regardless of the public´s willingness or ability to pay just keeps growing.
It should be obvious to everyone why stagnant and falling incomes will doom the opportunity society. Tax cuts will only marginally help workers who earn increasingly meager wages and, therefore, have less and less taxable income to begin with to cut and transfer to private health and retirement accounts. The idea that these workers will be able to buy a business or a home after tax cuts is downright moronic. Tax cuts will be equally pointless for workers deciding among job training programs if the economy keeps losing job opportunities that can pay a living wage.
In other words, tax cuts and privatization can´t drive U.S. economic policy unless the United States retains, or rebuilds, a meaningful tax base. If President Bush knows how to do this without reversing his outsourcing-centered trade policies, now´s the time to tell us. But that´s unlikely unless his opponents start asking him.
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
Only those lacking creativity think that competition with the Third World equates to lower wages for American workers.
Competition creates innovations that protect worker salaries and lower product costs at the same time.
Good point. Japanese know it, Chinese know it, Europeans know it. USA is following example of Latin America.
Sounds like the same refrain we heard from those lamenting the loss of the "family farm". We changed from an agricultural society to an industrial society. We can transform from an industrial society to whatever is next without a left turn.
I do not get it, how the innovations can protect higher salaries in the global economy? Please explain.
Whatever is next? Socialism?
Sorry, but the auto industry is a prime example. Product life cycles are down to 3-4 years, profits are high and wages are peaked.
I think it's clear that not only is Kerry dangerous as C-in-C--but he's also an imitation of GWB on the question of American industrial/trade policy.
Given that, the choice is clear.
Frankly, the only "we" he could be referring to is everyone here...
Eroding the income of workers in the US will serve to erode the income of everyone ELSE in the US--their doctors, dentists, butchers, clothiers, on and on...
Only Gummint workers and utility employees will be able to demand and get (at least temporarily) wage stability or inflation.
But that won't last forever, either.
So do not ask for whom the bell tolls.../It tolls for Thee.
Let's look at the auto industry. Through innovations like computer design, automated manufacturing processes, plastics, etc the US auto industry is strong. Consumers have more choices in vehicles, profits are high, life-cycles are short and quality is at its best.
If we would have listened to the protectionists in the 1980s, our car companies would have been protected, stagnant and dead meat when finally exposed to Japanese competition.
You did not answer my question.
In the 60s, product life cycles were 3-4 years, profits were high and so were wages.
Instead of low-cost workers, why can't we have low-cost executives?
And if this trend persists, prepare for a landslide victory for Hillary, or worse, in 08.
In short: NAFTA
You asked how innovation protects salaries in a global economy. The auto industry wages are higher than ever, yet they compete with extremely low-wage nations every day.
No. Product life cycles in the auto industry in the 1960s averaged 7-10 years. A new car took 5+ years to design and bring to market. Today, it takes 3 years to bring a new car design to market.
Actually, we do. Executives today are getting much lower salaries than in the past. They are getting bonuses for performance (that workers resist for themselves) and executives end up with total compensation packages that are all all-time highs.
I think you have that backward --- labor shortages lead to innovations which increase productivity --- unlimited, very cheap labor doesn't lead to innovations.
One reason a country like the USA took to machines was because of limited cheap labor, countries like Mexico with abundant cheap labor had no need in machines and stayed inefficient.
I agree. However, today you can find cheap labor by moving overseas. Innovative executives are looking for alternatives to moving overseas because they are Americans as well and they do not want to see the jobs leave.
Anybody who wants to claim that the majority of American Corporate Executives have no allegience to this nation are just misinformed. Most do not want to move jobs overseas. They are forced by lack of innovation, restrictive labor contracts, or restictive regulations.
Cheap employees don't make an industry sharp --- and another thing is they don't make the product especially cheap. In the 70's it was possible to buy a new car made with all well-paid American labor for $3000 to $6000. Today with all that $0.25 to $0.50 an hour foreign labor a car can cost over $30,000 --- labor costs drastically fell but the cost of the product to the consumer radically rose.
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